Thousands of Arizona Department of Corrections inmates who have paid jobs while they're incarcerated may owe Uncle Sam a bit of money.

The state for the first time has issued 1099-MISC forms to 8,031 inmates who earned money working at prison jobs in 2016. State inmates can earn from 10 cents an hour working jobs inside the prisons to a few dollars an hour if they are low-risk felons working outside the correctional system in jobs at egg farms or fighting fires.

Those receiving tax forms represent about 19 percent of the inmate population. This is the first year they will receive the tax forms.

Andrew Wilder, a DOC spokesman, said the agency decided to make the policy change because officials determined income earned by inmates should be reported to the Internal Revenue Service. Anyone earning at least $600, the threshold per IRS guidelines, was recently issued a 1099-MISC form.

Wilder said the agency would provide necessary resources to assist inmates who may need to file tax returns, but DOC would not provide assistance or preparation advice. He noted most inmates likely would not have a tax liability because their overall earnings would not be that high. If taxes are owed, the payment would come from an inmate's financial account, where work proceeds are deposited. Inmates can use some of their earnings to buy goods at a prison store, but most is held for them and then released to them when out of custody.

Workers who receive those forms typically are independent contractors who control their work schedules and hours, and those types of workers are responsible for paying self-employment taxes — Social Security and Medicare taxes — in their entirety. The rate for those FICA taxes is 15.3 percent of earnings. Rosenfield said inmates clearly do not control their work schedules, assignments or hours.

Regular employees, unlike contractors, share those taxes with their employer. The taxes of a regular employee are detailed in a W-2 wage and tax statement. Rosenfield said he believes inmates would more fairly fall in this category.

"An independent contractor has to be able to contract independently," Rosenfield said. "The hours that they (inmates) work are determined by the employer. … They have no control over the job, other than their performance. All of these people are really employees."

Rosenfield said the Department of Corrections should be liable for the employer's share of the FICA taxes. "If private companies did this, they would be open to all kinds of penalties," he said.

Wilder said the inmates are not employees because they are "wards of the state" and DOC is not their employer.

Rosenfield disagrees and said he notified the IRS, claiming DOC was in violation of federal labor laws.

A local IRS spokesman referred all questions to the agency's central office, which did not respond to an email seeking comment.

Rosenfield said it is unlikely any of the inmates will have any income tax liability unless they earn more than $10,450 a year.

Reach the reporter at craig.harris@arizonarepublic.com or 602-444-8478.

Inmates work inside the Arizona State Prison-Kingman in June 2016.(Photo11: Tom Tingle/The Republic)